Quebec runs historic $11B deficit in budget that prioritizes health, education

Quebec Finance Minister Eric Girard delivered Tuesday the most challenging budget of his mandate with a projected $11-billiondeficit for the next fiscal year.

He said that, in real dollars, it could be the highest in the province's history.

The deficit for 2024-25 is more than three times higher than what the government had forecastfor 2023-24.

Of the latest projected deficit, $4 billion is structural, Girard said, and the rest is related to new spending and managing the province's debt. He attributed increased spending to expenses that were considered temporary during the pandemic, but have since become permanent.

New collective agreements with the public sector will also lead to a hike in expenses over the next five years.

"Right now, we have no growth," Girard said, noting a hike in interest rates over the last year and other difficult economic conditions.

"We had forest fires, we had reduced electricity production because of water shortage and we still managed to grow 0.2 per cent. That's a testament to the resiliency of the Quebec economy."

As expected, the government is postponing its deadline for paying off Quebec's debt. It hopes to achieve a balanced budget by 2029-30 two years later than it had planned last spring.

The province's economy will be far from keeping up with government spending for the foreseeable future. For the next five years, the province predicts spending will outpace revenue.

Girard said next year he will present his plan to get Quebec out of the red. But this year, his budget prioritizes health care and education.

For 2024-25, health and social services spending stands to increase by 4.2 per cent, to a total of $61.9 billion the largest slice of the $157.8 billion budget pie.

Education spending is increasing 9.3 per cent for a total of $22.4 billion over the next year. Higher education spending will rise 3.5 per cent in 2024-25 for a total of $11 billion.

Interest on the province's existing debt is expected to cost Quebec $9.7 billion over the next year.

WATCH| What the Quebec budget means for your wallet:

Cigarettes, electric vehicles and education spending: what's in Quebec's 2024-25 budget for you

6 months ago

Duration 1:26

Quebec Finance Minister Eric Girard delivered a budget with a projected $11-billion deficit for the next fiscal year. It includes higher taxes on cigarettes, saying goodbye to electric vehicle rebates in the coming years and money to address the shortage of teachers in the province.

'Comprehensive review' of spending

Girard said the government will soon start a "comprehensive review" of itsspending with the aim of returning to a balanced budget on schedule.

The province is also counting on finding $2.9 billion in savings in five years' time through "optimization" measures.

Part of its strategy is asking its Crown corporations Hydro-Qubec, Loto-Qubec, the Socit des alcools du Qubec, the Socit qubcoise du cannabis and Investissement Qubec to find an extra $1 billion in net revenue over five years.

It will also seek to "simplify" its tax credits for businesses and "strengthen" its audit and tax collection mechanisms.

The Quebec government is also counting on receiving its "fair share" of federal transfers to cover the costs of services to asylum seekers and expenses related to health care, infrastructure and workforce development.

Girard said Quebec is asking Ottawa for an "unconditional opt-out" with full financial compensation from the Canadian Dental Care Plan and any future Canadian pharmacare plan.

Part of the CAQ goverment's bet is that the economy will improve by 2025. That's when Quebec's Balanced Budget Act requires Girard to submit his five-year plan to balance the budget.

The government is projectingthat the Quebec's gross domestic product will grow by 0.6 per cent in 2024, a slight decrease from what they were projecting in November.

They are more optimistic for 2025, where they forecast a 1.6 increase in GDP.

Keeping the health-care network running

Quebec's accounts are still reeling from the consequences of the pandemic, with hospitals struggling to catch up on a backlog of surgeries accumulated since 2020.

That, along with the province's aging population and costly updates in health-care technology, is driving up expenses.

To keep the health-care network functioning, the goverment will spend an additional $1.8 billion to improve access to care over the next year.

The majority ofthat sum $902.5 million will go toward speeding up the digital transition of the health-care system, a longstanding issue that health-care workers have raised.

Quebec will also spend $306.5 million for additional hospital beds. There are currently 2.3 beds and stretchers per 1,000 people in the province.

The province is also increasing taxes for cigarettes by 25 cents per pack as of midnight, and another 25 cents per pack in January, a move Girard says will both increase tax revenue and discourage smoking.

Increases in education spending

In this year's budget, the government is setting aside about $8.8million for the Higher Education Ministry to boost graduation rates and "promote accessibility to colleges and universities" an increase of roughly four per cent.

Spending increases in education are largely due to the rising costs related to delivering preschool, elementary and high school education services and attempts to draw students to vocational streams.

Penalty for retirees with disabilitiesaxed

Quebec's retirement pension reduction, which imposed steep penalties on seniors with disabilities, will be eliminated, starting January 2025.

The Tribunal administratif du Qubec, which allows people to challenge decisions made by provincial ministries and agencies as well as municipalities, ruled in 2020 that the measure was discriminatory.

After the Legault government appealed the decision to Quebec's Superior Court, a disability advocacy group filed a complaint with the United Nations about the measure. The group argued that it violated the Convention on the Rights of Persons with Disabilities.

On Tuesday, Girard said he was proud that this budget would remove those pension reductions.

All opposition parties were in favour of removing the clawbacks.

WATCH | Why is Quebec running a deficit?:

What Quebec's deficit means for you

6 months ago

Duration 1:49

Since the pandemic, Quebec has been spending more money than it takes in. A larger deficit adds to the province's debt, which is now worth more than $200 billion.